Power needed for mining projects: reports

Premier Kathy Dunderdale was preaching to the choir when she spoke about power needs for industrial developments in Western Labrador at the opening of the Mineral Resources Review 2012 conference Thursday morning.

Dunderdale addressed delegates at the Delta Hotel and Conference Centre in St. John’s, shortly after the government released reports on both the economic value and power needs of proposed Labrador mines.

“There are huge opportunities in Labrador, and you know, many of these companies have been planning for years to take advantage of those opportunities. And in all of their discussions with us over the years, power has been an issue,” the premier told reporters following the speech.

The premier’s speech touched on points repeated since the final cost estimates on the Muskrat Falls hydro development were released earlier this week.

The premier said the 824 megawatts from Muskrat Falls will be enough to meet immediate power needs for Labrador mines post-2017, on top of supplying power to customers on the island and, should the Maritime Link move ahead, customers in Nova Scotia.

Beyond that, “there’s a whole suite of options that become enabled once we’ve developed Muskrat Falls, and that project then includes the Maritime Link. So there’s all kinds of opportunities then,” she said, pointing to small wind and hydro projects, or the development of a dam at Gull Island for an additional 2,250 megawatts of power.

“The one thing we do know for sure is that development can’t happen in Labrador without access to power.”

That fact is also being conveyed within the two new reports on the provincial mining industry.

One was produced by staff at the Department of Natural Resources and the second, commissioned by the government, was produced by economist Wade Locke with Strategic Concepts, a consulting firm in which he is a senior partner. Both have been made available at the government’s new site for Lower Churchill information: www.powerinourhands.ca.

The report from Locke and Strategic Concepts — titled “Economic Impact Analysis of Iron Ore Mining Industry in Labrador 2011-31” — sets out how the iron ore industry in western Labrador contributes to the provincial economy through employment, taxation revenue and contributions to the gross domestic product.

Looking at the potential for growth, it suggests production in Labrador could grow from the current 26 million tonnes per year to 81 million tonnes, if all projects being proposed are actually developed.

Over a 21-year period, it states, such growth would result in an additional $80 billion in new capital and operating expenditures, 358,000 person years of employment and an additional $17.5 billion in tax revenue.

However, a lack of power and labour are potential constraints on that growth.

The latest information from the Department of Natural Resources — a report titled, "Labrador mining and power: how much and where from?" — states there is the potential for $10-15 billion in new investment in Labrador mining projects in the next decade, if the power is available.

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It provides best and worst-case scenarios in terms of the availability of power, stating demand from Labrador mining projects will likely surpass the current supply in 2015-17.

It recommends Muskrat Falls be brought online to add power to the system.

“The economics of the industry demand competitively priced power. And we know what the power is costing Quebec and we know we have to be competitive with Quebec,” Minister of Natural Resources Jerome Kennedy told conference delegates, speaking before the premier’s address.

The government’s information was well-received by industry players.

“As the premier rightfully highlighted this morning, mining is an energy-intensive process and ... hydro-based electrical energy, in particular, is an absolute asset for any mining development. So we’re delighted as a mining industry to hear that the Muskrat Falls will proceed as planned and the numbers do support the project,” said Alderon Iron Corp. president and CEO Tayfun Eldem.

Alderon does not need the Muskrat Falls development to get started on its Kami iron ore project, near Labrador City-Wabush.

“But again, as the premier said, in 2016-17 there’s essentially no more power coming out of Churchill Falls to allow for incremental development and Muskrat Falls fills that void and fills it just in time,” Eldem said.

The chairman of Mining Industry NL, George Ogilvie, announced that organization’s decision to support the development. Ogilvie is also president and CEO of Rambler Metals and Mining.

Reports, speeches and opinions on the project came even as the construction work at Muskrat Falls continued near Happy Valley-Goose Bay.

Nalcor Energy announced it will be proceeding with “further site work” in the coming weeks, despite no official sanction decision by the provincial government. The work is to include some excavation and installing temporary accommodations for 250 workers.

“The decision to undertake these activities was based on an evaluation of the costs, the potential risks to the project schedule, and the long-term value of the work,” Nalcor Energy president and CEO Ed Martin stated.

“A delay in the start of site excavation, until spring 2013, would ultimately impact the overall project schedule and first power from Muskrat Falls could be over six months. This would result in additional carrying costs, including an estimated $200 million in additional costs for continued operation of the Holyrood plant — a cost that would ultimately be passed on to island consumers in increased electricity rates.”

Liberal MHA Yvonne Jones said she would like more information to be made available on contracts associated with the continuing work.

afitzpatrick@thetelegram.com